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By XE Market Analysis December 4, 2013 1:57 pm
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    XE Market Analysis: Asia - Dec 04, 2013

    The dollar perked up, as equities fell and yields moved higher in the aftermath of the better ADP employment report. The greenback's gains were short lived however, as non-manufacturing ISM disappointed, and as the market girded itself for Thursday's ECB meeting. The Bank is not likely to cut rates, although updated staff projections are likely to bring a downward revision to inflation forecasts and the risks to the economic outlook continue to lie on the downside. Generally though, some euro short covering was apparent in N.Y. trade on Wednesday. EUR-USD slipped to 1.3530 from near 1.3600 after the jobs data, though recovered back to 1.3605 later in the session. USD-JPY was weighed down by a soft risk backdrop, again testing the 102.00 level.

    [EUR, USD]
    EUR-USD had already been in retreat following another failed attempt to sustain gains through 1.3600 when the solid 215k headline of the ADP report hit the wire headlines. The pair subsequently extended to a 1.3569 low where it found a toehold and rebounded back toward the 1.3580-90 area, so quite a bit of chop so far in the New York AM without pronounced directional progress. EUR-USD edged to 1.3545 post trade data, adding to losses sustained following the stronger ADP jobs print. The 1.3540 level provided support so far this week, which was again the case on Wednesday. Pre-ECB short covering, along with a mostly damp dollar elsewhere allowed EUR-USD to move back over 1.3600 in subsequent trade.

    [USD, JPY]
    USD-JPY traded about a 102.40 to 102.75 range through the morning session, though as Wall Street crapped out later in the day, the pairing edged steadily lower. The pairing eased through the 102.30 level, and tripped intra day stops 102.25. Underneath, bids into the figure slowed downside progress, though the pairing eventually traded to lows under 101.85 on further stop loss selling interest. USD-JPY may remain under some pressure, until equities and risk appetite return. In the meantime, fretting over Fed tapering may weigh.

    [GBP, USD]
    Sterling dipped on the services PMI miss, but found a toehold against both the USD and GBP fairly quickly as the overall U.K. picture remains bullish for the currency. Cable logged a new low for the week at 1.6323 and EUR-GBP a high for the week at 0.8321. As the dollar struggled overall in N.Y. trade, cable rebounded back briefly over 1.6400, though the outperforming euro, saw EUR-GBP edge higher.

    [USD, CHF]
    We anticipate CHF to remain on a firming course against the USD and EUR through to the week's end. The rekindled U.S. Fed tapering view as proven supportive for the safe haven Swiss currency, as this backdrop has elicited some risk aversion in global markets. We also anticipate a firm U.S. jobs report on Friday, which in the event should strengthen the possibility of the Fed commencing a tapering program and which would stir a higher degree of risk aversion in markets. USD-CHF is technically looking bearish too, holding within a three-week bear channel, targeting 0.8990. EUR-CHF has sunk to its range lows of the last month in the 1.2280-1.2300 region.

    [USD, CAD]
    USD-CAD ran up to 1.0697 from 1.0675 following the BoC announcement and statement. The Bank emphasized the downside risks to inflation, which was enough to keep the CAD under pressure. USD-CAD ran into good offers under 1.0700, presumably related to the defense of option barriers at the figure. USD-CAD later took another look at the 1.0700 mark, this time managing to snuff out barriers, and reach a high of 1.0707. A new band of buy stops was seen at 1.0710, and sources now say above the 20 level, there is very little in the way of selling interest until 1.0750. Initial resistance is seen at the May, 2010 high of 1.0719.

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